Transcript Document
Expanding Housing Opportunity in Providence Through Inclusionary Zoning: Recommendations for Policy Discussion Purposes
Kalima Rose Associate Director March 16, 2006
Acknowledgments
• • • • • • • • • • • • • • • • • Thanks to the Annie E. Casey Foundation for grant support for this research study. Thanks to James Lucht at the Providence Plan for data support and mapping of recent Providence development patterns.
Thanks to Sandy Rose of Urban Resources Group for the financial analysis of Providence developments.
Thanks to Making Connections Providence staff Juanita Mobley for logistical support of the advisory group members that lent their expertise to this study: Corrine Teed Brenda Clement Elizabeth Debs Rachel Miller Barbara Fields Eric Shorter Pat McGuigan Garry Bliss Linda Painter Thom Deller Bonnie Lloyd Robyn Frye Elmer Stanley Bert Cooper Ron Butler Aimee Olin Amy Rainone Cooperativa El Sol Housing Network of Rhode Island Housing Network of Rhode Island Jobs with Justice LISC LISC The Providence Plan Providence Mayor’s Office Providence Planning Department Providence Planning Department Providence Planning Department Making Connections Providence Making Connections Providence Making Connections Providence Making Connections Providence Rhode Island Acorn Rhode Island Housing
Inclusionary Zoning: One Important Solution
Requires a percentage of housing units in new residential developments be available to low and moderate income households. Developers receive compensation (e.g., density bonuses, zoning variances) in exchange for contributing to the affordable housing stock.
Benefits of IZ
Fosters mixed-income communities in redevelopment and growing new developments.
Ensures housing for a diverse labor force and a spectrum of households—both rental and ownership.
Provides a consistent regulatory framework to guide affordability in the market.
Inclusionary Zoning:
A Widely Used Strategy
Hundreds of Localities California Massachusetts New Jersey Colorado New Mexico Greater DC region
What is driving national IZ expansion?
Rapid escalation of housing prices Housing costs outpacing income growth Population growth Renewed focus on infill and redevelopment in urban settings Focus on affordable housing near jobs Loss of federal investment Social efficacy of mixed income communities
Why Should Providence Consider IZ?
City reviewing zoning Mounting housing costs Need for more affordable housing Changing uses Desired infill development Promotion of mixed income development Other RI jurisdictions adopting Greater metro region includes many IZ districts (MA) State plan calls for addressing affordability
Growing Need for Affordable Housing in Providence
Overall Population: 40% of renters, 28% of homeowners pay more than 30% of their income on housing costs.
Equitable development is achieved through policies and practices that enable low-income and low-wealth residents to participate in and benefit from local and regional economic activity.
Incomes Have Not Kept Pace with Housing Prices
Time Period by Quarter
Q1 2002 Q4 2003 Q1 2004 Q2 2004 Q3 2004
Q4 2004 Housing Opportuni ty Index*
76.8
58.5
58.8
52.9
49.6
47.9
Median Sales Price (000)
128 174 180 196 205
210 Median Family Income (000)
54.1
58.4
60 60 60
60 Regional Affordability Index
9 19 21 21 19
19 National Affordability Index
74 112 117 116 111
111
*The Housing Opportunity Index (HOI) for a given area is defined as the share of homes sold in that area that would have been affordable to a family earning the median income. Therefore, there are two major components - income and housing cost.
Source: First American Real Estate Solutions sales transactions data; analyzed by NAHB Economics
Rental Housing Increasingly Unaffordable
Rental Housholds, 2005 Location Estimated Renter Median Annual Income Income Needed to Afford 2BR Fair Market Rent as Percent of Renter Median Estimated % of Renters Unable to Afford 2-bdm Fair Market Rent Monthly Rent Affordable at Mean Renter Wage (2004)
Rhode Island
Providence-Fall River Warwick, RI-MA
Source: National Low Income Housing Coalition $29,859
$28,938
128%
133%
60%
62%
$538
$541
Homeownership Costs Also Rising
Change in Median Residential Sales Price, 2000-2005
129% 176% 179% 176% 131% 181% 154% 225% 37% 219% 64% 102% 355% 272% 120% 164%
Insufficient sales data for Downtown
235% 225% 244% 318% 292% 176% 201% 191%
Source: Warren Information Services (Single Family, 2-5 Family, and Res. Condo Sales) Analysis by The Providence Plan
Poverty by Neighborhoods in Providence This map shows a breakdown for households and families that are below 150% of poverty level.
Providence Experiencing Growth
City Population Growth Compared to 10 Fastest Growing Neighborhoods, 1990-2000 Top 10 Fastest Growing Neighborhoods
Wansk uck
1990 Population
9,448
2000 Population
11,270
Total Change
1,822
Silver Lak e West End Hartford Federal Hill
14,906 9,141 4,933 6,885 10,943 16,476 6,261 7,952 1,802 1,570 1,328 1,067
Valley College Hill Mount Pleasant Lower South Providence Olneyville
City Top 10 Neighborhood Total
3,722 8,980 9,281 5,102 5,866
160,728 78,264
10,221 4,765 9,951 5,744 6,495
173,618 90,078
1,043 971 940 642 629
12,890 11,814 % Growth
Data: The Providence Plan 19% 20% 11% 27% 15% 28% 11% 10% 13% 11%
% of City Growth
14% 14% 12% 10% 8% 8% 8% 7% 5% 5%
8% 15%
More than 12,000 New Residents; Immigration to Specific Neighborhoods
Total Population Change 1990-2000, City of Providence
City Top 10 Neighborhoods Combined
1990 Population 160,728 2000 Population 173,618 Net Population Gain 12,890 Percent Population Growth 8.0% 78,264 90,078 11,814 15.1%
Share of City Total
49% 52% 92%
Data: The Providence Plan
Higher Family Poverty in Growing Neighborhoods
Poverty Status for Households and Families, 2000 Providence Geography Top 10 Neighborhoods Top 10 Neighborhood Share of City Total Households
62,389 29,717
Households below 1.5 of Poverty
25,193 13,845
Family Households
35,859 18,495
% of Total Households
57.5% 62.2%
Family Households below 1.5 of poverty
13,106 8,204
%
36.5% 44.4% 47.6% 55.0%
51.6% 62.6%
Larger Units Command Higher Costs
Change in Average Rents for Providence, 2000-2004 0 Bedroom 2000 2001
$ $ 585 585
Percentage change 2000-2004 2002 2003 2004
$ $ 592 694
1 Bedroom
$ 587 $ 626 $ 727 $ 812
2 Bedroom 3 Bedroom
$ 736 $ 769 $ 884 $ 1,012 $ $ 805 917 $ 984 $ 1,199 $ 643
10%
$ 890
50%
$ 1,066
44%
$ 1,264
57%
Larger Units Command Higher Costs
Change in Average Rents, 2000-2004
1400 1200 1000 800 600 400 200 0 2000 2001 2002
Year of Survey
2003 2004 0 Bedroom 1 Bedroom 2 Bedroom 3 Bedroom
9 of 10 Growing Neighborhoods Face a Rent Burden
Rent Burden, 2000 As a Percent of Household Income for Specified Renter-Occupied Housing Units Paying More than 30% of Income on Rent % College Hill
Elmwood Fox Point
Valley Lower South Providence
Washington Park Elmhurst
Mount Pleasant
Mount Hope Charles Downtown
Olneyville City of Providence
Smith Hill
West End Silver Lake Federal Hill
Manton Wayland Reservoir
Wanskuck
Upper South Providence
Hartford
Blackstone Hope S. Elmwood 811 1,409 936 599 567 472 659 710 899 724 600 816
17,442
751 1,669 1,012 1,159 268 572 166 956 492 460 338 275 122 56.6% 50.6% 50.4% 49.6% 46.5% 46.0% 45.2% 45.2% 44.8% 44.2% 43.7% 43.7%
42.7%
42.2% 41.9% 41.2% 40.2% 39.2% 39.2% 36.9% 36.1% 35.9% 35.8% 32.1% 31.3% 28.0%
Homeownership Costs Also Rising
What are Providence Development Trends?
• Significant residential development • Historic mill rehabilitations • 18% of new construction has some affordable housing subsidy
New Residential Units Number by Neighborhood with Affordability
January 1, 2002 – June 30, 2005 Source: Department of Inspection & Standards (Permit Database) and Department of Planning & Development
NOTE:
Affordability determined by organizational contact in DIS database and designation in DPD "Development Prospects" document (or through DPD correspondence).
Analysis by ProvPlan
New Residential Projects Permitted
New Residential Projects Permitted
New Residential Projects Permitted
New Residential Projects Permitted: Affordable Units
Mill Sites in Providence
"Mill" Sites (Pre-1960 Industrial & Commercial Buildings)
What Objectives Should IZ Policy Meet?
Fair to developer Consistent in generating affordable housing Capture of land value generated through zoning action for public need Community stakeholders prioritize compensations and delivery of benefits
IZ is One Strategy to Contribute to Housing Need
Will capture small percentage of new development Need revenue sources to capitalize further below-market housing options Guide land use to promote more affordable options
Market Impacts of Inclusionary Zoning
The California Experience A study of California inclusionary housing programs found that
not a single program
had a negative effect on housing production. Study covered 1981-2000, for 28 cities with inclusionary housing programs including Orange, San Diego, San Francisco, Los Angeles, and Sacramento counties, and the state in general.
Most jurisdictions with inclusionary programs saw an
increase
in housing production (sometimes dramatically). Source: David Paul Rosen and Associates, Los Angeles Inclusionary Housing Study: Final Report, 2002.
Impact of Inclusionary Zoning on Property Values
Montgomery County, Maryland and Fairfax County, Virginia The House Next Door, a study of the impact of subsidized housing on property values of private market rate housing in mixed-income environments revealed: Presence of below-market housing in a neighborhood does NOT lower the value of the market-rate homes in its vicinity. No significant difference in price trends between market-rate homes in the areas with inclusionary units and the market as a whole.
The presence or proximity of inclusionary housing made NO difference in housing values as measured by relative price behavior in a dynamic market.
Source: Innovative Housing Institute, http://www.inhousing.org/
Shape the Plan to Fit Specific Community
Take into account: Development Dynamics Scale of built environment Where density is desired/tolerable Underserved categories of housing need Historic housing occupancy patterns Financial feasibility
Conduct Feasibility Study
Choose neighborhoods where significant new development will be encouraged.
Identify likely building types.
Apply density bonuses, other cost reductions, and set-aside goals and run the numbers.
Recommendations for Providence
• • • • • • • Apply density incentives of 20% increase for all developments of 12 units or more, with the following percentage of units set aside as affordable: – 20% of the market rate units for new construction other than mid and high rise structures – 12.5% for mid and high rise structures (defined as buildings of 5 or more stories, of concrete and/or steel frame construction, with elevator service).
– 10% for substantial rehabilitation projects Half of inclusionary rental units will be made affordable to residents below 60% of AMI ($38,310); and half affordable to 60-100% ($38,310-$63,850) of AMI.
PHA/RIH to provide qualified screened candidates’ list to landlords of rental units, including Section 8 voucher holders (to make more affordable to lower income renters).
Half of inclusionary ownership units will be made affordable to residents below 65% of AMI ($41,502); and half affordable to 65-100% (below $63,850) of AMI.
Allow purchase of 40% of inclusionary ownership units by RIH or qualified nonprofits.
Ownership units affordable for 30 years, shared equity goes to HTF Rental units affordable for life of development
Financial Feasibility of IZ Developments
Site Type 1: Large Downtown Condominium Development Financial Feasibility analysis of condo development with IZ reveals: 12.5% of the total new units created could be made affordable through mandatory inclusionary zoning.
The developer would be able to receive a targeted market-rate financial return – 14% annual return on equity Two tiers of affordability (60% AMI/100% AMI rental, 65%/100% ownership) would allow diversity of working families Provision of Section 8 voucher holders to landlord will allow for deeper affordability
Type 1: Large Condo Development
Summary Comparison Financials for Large Condo Development in Providence
Without IZ Requirement With 15% IZ Requirements With 12.5% IZ Requirements With 10% IZ Requirements Market rate units Affordable units Total Units Construction costs* Soft costs Site acquisition costs Total development cost Gross sales Net profit Developer return on equity
Annualized return for 3 years
Affordable Units serving 100 0 100 $19,111,733 $3,928,069 $2,750,000 $25,789,800 $29,840,000 $2,558,200 49.60%
16.53%
105 15 120 $ 22,720,346 $4,206,657 $2,750,000 $29,677,003 $33,545,000 $2,213,447 35.35%
12.43%
15 units- 65 100% AMI 103 13 120 $22,754,274 $ 4,206,657 $2,750,000 $29,710,931 $33,880,000 $2,494,269 40.86%
14.00%
13 units- 65 100% AMI 110 10 120 $22,789,502 $4,206,657 $2,750,000 $29,746,159 $34,305,000 $2,858,591 46.74%
16.02%
10 units at 65 100% AMI * Rerunning calculations as parking costs appear underestimated and commercial ground floor revenues not included. Could change rate of return, and therefore recommendation. 1/08/06.
Financial Feasibility of IZ Developments
Site Type 2: Medium size Neighborhood Condo Development Financial Feasibility analysis of condo development with IZ reveals: 20% of the total new units created could be made affordable through mandatory inclusionary zoning.
The developer would be able to receive a targeted market-rate financial return – 25.7% annual return on equity Deeper affordability could be possible through nonprofit purchase, Section 8 vouchers
Type 2: Small Condo Development
Summary Comparison Financials for Small Condo Development in Providence
Market rate units Affordable units Total Units Construction costs Soft costs Site acquisition costs* Total development cost Gross sales Net profit Developer return on equity
Annualized return for 3 years
Affordable Units serving Without IZ Requirement
40 0 40 $5,709,688 $1,295,386 $880,000 $7,885,074 $9,250,000 $902,426 83.17%
27.72%
With 20% IZ Requirements With 15% IZ Requirements With 10% IZ Requirements
40 42 44 8 48 $ 6,760,144 $1,378,627 $ 880,000 $ 9.018,770 $10,440,000 $899.230
77.03%%
25.68%
4 units- 80 120% AMI 4 units-50-80% AMI 6 48 6,760,144 $1,378,627 $ 880,000 $ 9.018,770 10,600,000 $1,051,230 78.52%
30.20%
6 units- 50-80% AMI 4 48 6,760,144 $1,378,627 $ 880,000 $ 9.018,770 $10,770,000 $1,212,730 90.59%
26.17%
4 units at 50-80% AMI
Want Deeper Affordability or More Housing?
Develop Cost Offsets Relevant to Providence
Projected Impacts of IZ Cost-Offsets, Los Angeles
Low Density Rental
Savings per Affordable Unit (assuming 15 percent-aside)
Medium Density Rental High Density Rental High Density Rental (Type III) Owner Single Family Owner attached Owner condos
Cost Offset
Reduce size Reduce bathrooms Modest interior finish Reduce parking Defer fees Allow tandem parking TOTALS $18,644 3,805 9,278 5,833 3,842 520 $41,922 $19,533 4,357 8,333 5,444 3,876 909 $42,453 $21,026 4,690 8,333 54,444 5,318 9,094 $102,905 $24,565 5,634 8,517 76,667 5,318 12,718 $133,418 $56,707 2,729 16,000 NA 8,446 NA $83,882 $35,151 9,696 13,611 Source: David Paul Rosen and Associates, City of Los Angeles Inclusionary Housing Study , September 2002.
NA 6,960 NA $65,419 $32,520 9,034 9,650 NA 6,887 NA $58,091
Condos (Type I)
$62,472 15,025 10,033 NA 11,238 NA $98,767
Want Deeper Affordability?
Layer with other subsidy: • Require % of units to be filled by Section 8 voucher holders (this could make affordable to family earning as low as $19,155) • Apply grants, no- or low-interest loans, soft second mortgages, or rental assistance from Housing Trust Fund or other affordable programs • Couple with Low-Income Housing Tax Credit program
Recommendations for Providence
• • • • • • • Apply density incentives of 20% increase for all developments of 12 units or more, with the following percentage of units set aside as affordable: – 20% of the market rate units for new construction other than mid and high rise structures – 12.5% for mid and high rise structures (defined as buildings of 5 or more stories, of concrete and/or steel frame construction, with elevator service).
– 10% for substantial rehabilitation projects Half of inclusionary rental units will be made affordable to residents below 60% of AMI ($38,310); and half affordable to 60-100% ($38,310-$63,850) of AMI.
PHA/RIH to provide qualified screened candidates’ list to landlords of rental units, including Section 8 voucher holders (to make more affordable to lower income renters).
Half of inclusionary ownership units will be made affordable to residents below 65% of AMI ($41,502); and half affordable to 65-100% (below $63,850) of AMI.
Allow purchase of 40% of inclusionary ownership units by RIH or qualified nonprofits.
Ownership units affordable for 30 years, shared equity goes to HTF Rental units affordable for life of development
Steps to finalize policy
Formulate community priorities for implementation: Build on site Identify further cost reductions or additional subsidy to allow for deeper affordability Which entity to administer?
Planning dept? Rhode Island Housing? RIHA? Nonprofit?
Reach out to developers to help shape policy Reach out to labor groups, faith leaders, others’ whose members need housing Finalize proposal Move into law legislatively or administratively Visit community members in new houses!